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Apple beats earnings expectations with $53.3B in revenue, stock up 3%

Aug 01 2018

The Apple (NASDAQ:AAPL) Q3 2018 earnings are out, with the tech giant having posted a revenue of $53.3 billion, along with a quarterly profit of $11.5 billion, or $2.34 EPS, where it beat expectations of $2.18 EPS. Its mobile unit reported a 22 percent drop in sales revenue to $20.2 billion from the same time previous year. A higher ASP means customers purchased more high-end handsets such as the iPhone 8 Plus and iPhone X, versus the iPhone 8 and prior generation models.

Analysts on average expected Apple (AAPL) to post earnings of $2.16 per share, according to FactSet.

About the only impediments holding Apple from $1 trillion are buybacks and dividends, which enhance the company's share price though doesn't necessarily enhance its overall market value.

The company said it expects fourth-quarter revenue of between $60bn (£45.7bn) and $62bn (£47.2bn). That's inline with sales from Q3 2017, when Apple sold 41 million smartphones.

As the entry-level iPhone, the 6.1-inch device is expected to have an LCD screen and a lower price tag.

The results "were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline", Tim Cook, Apple's chief executive officer, said in a statement. This segment includes AppleMusic, App Store sales as well as Apple Care and iCloud subscriptions.

Apple sold 41.3 million iPhones in the quarter that ended June 30, just shy of the 42 million figure anticipated by analysts. It has also soothed investor concerns with a US$100 billion stock buyback program and promises of growth from services such as streaming music and video, where Apple faces competition from rivals including Spotify Technology SA and Netflix Inc.

Apple's best-selling products do not yet face duties stemming from the US-China trade disputes, but US President Donald Trump has threatened hundreds of billions of dollars in further tariffs on product categories not yet been enumerated.

The company said it expected gross margins of 38 to 38.5 per cent in the fourth quarter, compared with analyst expectations of 38.3 per cent, according to Thomson Reuters data. Apple also regained growth in China, where sales rose 19 percent.

Apple moved 11.5 million iPads last quarter, up 1% on the year.

Also drawing positive scrutiny are Apple's "other products" which includes AirPods earphones and HomePod speaker systems. Services reached a record $9.55 billion, and is well on the way to a runrate of $14 billion per quarter by 2020, the company said. That's in line with the company's recent forecast and translates to year-over-year revenue growth of about 15 percent, the strongest for Apple's June quarter since 2015.